A judge issued an opinion last week in a petition for review Pope County filed last year against the Arkansas Oil and Gas Commission (AOGC).

The petition, filed in April 2010, requested the Pope County Circuit Court reverse an order issuing a permit allowing Capstone Oilfield Disposal of Arkansas to be located in Pope County.

"I am therefore of the opinion that the issuance of the permit by the Commission should be reversed and remanded," Judge Russell Rogers wrote in a letter to attorneys involved in the case. Rogers is acting as a special appointed judge in the case, as circuit judges Dennis Sutterfield and William Pearson recused themselves from the case. He said Capstone did not file required financial assurance paperwork until five months after the issuance of the permit and said "such an extension without review or inquiry appears to me to be a carte blanche open-ended permit with no time limits."

Although Rogers did not return calls requesting comment Friday, the letter states "Mr. (G. Alan) Perkins (counsel for Pope County) may prepare an Order in accord with this opinion and submit it to other counsel for their objections, comments and suggestions," which indicates no official action will be taken revoking the permit until the order has been prepared and signed.

Shane Khoury, general counsel and deputy director of AOGC, said "it is pretty clear the judge found in favor of Pope County to some extent." He added there may have been some confusion as to the time line of the events in question, and said AOGC did not issue Capstone's permit until after the financial assurance was filed. Rogers' letter stated the assurance was filed March 29, 2010. Khoury said the order approving Capstone's permit was issued March 18, 2010, and the permit was actually issued April 6, 2010. Rogers did not indicate the exact date he understood the permit to have been issued, but said AOGC could "as of October 2009, issue a permit conditioned upon financial assurances being filed by Capstone."

Pope County Justice of the Peace Dusty Hampton, who has been involved in the case since it's inception, said "this ruling conforms that Pope County is on the right side of this issue. We welcome the oil and gas industry, but we want responsible companies that we can trust with our natural resources."

Rogers also stated in the letter, "I am not naive and recognize that the commission may and probably will simply re-issue the permit, which it certainly has the authority to do, but hopefully there will be some administrative supervision and investigation beforehand."

Because of a rule change to the Oil and Gas Commission's application procedures last year, however, Capstone may face greater scrutiny than in the past if it re-applies for a permit. The change, approved July 2010, allows the commission to deny permit requests from companies with a history of violating oil- and gas-related regulations.

Background

The controversy began in October 2009, when AOGC voted at a hearing to deny Capstone's application to inject brine into a field near Gum Log Road in Pope County. At the hearing, county residents, officials and lawmakers voiced concerns about Capstone's history in Arkansas and other states. Hampton was a vocal opponent of issuing a permit to Capstone. He covered a number of allegations about the company's past, including litigation in Johnson County.

"They have been involved in a lawsuit in Johnson County during the past two years," he said. "They have had two saltwater disposal well permits revoked there."

After the initial denial of the application, Capstone reapplied in November 2009 and was granted the permit. In March 2010, Hampton said the county was looking into taking legal action regarding the issuance of the permit. He said the problem was not the disposal wells themselves, but "that we want to ensure we have responsible companies in Pope County." After what Hampton called a disappointing meeting with AOGC, the quorum court voted to hire an attorney to appeal the permit at its March 2010 meeting.

Later that same year, a state legislative subcommittee - spurred initially by the concerns in Pope County regarding Capstone - met and approved the changes to AOGC's application process that allows the agency to consider disposal histories and see if they have histories that would jeopardize Arkansas' environment before issuing a permit.

In October 2010, AOGC issued an order that established regulations for Capstone's facility in Pope County. Commission director Lawrence Bengal said Capstone had 30 days to comply with the requirements of the permit. After that time period, the site was inspected and was in compliance. Bengal said the site is inspected regularly and has not had any violations. Hampton said he did not feel the regulations imposed by AOGC deemed the county's legal action irrelevant, because the petition focused instead on the technical issues with the permit's issuance.